Market Update

Core inflation numbers are released for the Euro Zone at 10am, its forecasted to attract a slight gain from 2.7% in April up to 2.9% for May. This should not have too much impact on markets as ECB decided to lower their interest rates the other week – stating that inflation levels are on a downward trajectory towards its base rate of 2%. Since ECB lowered their borrowing levels, we have seen EUR weakness against other currency pairs.

Seeing GBP/EUR touching 1.19 on Friday – a 22 month high. On the topic of core inflation, we have the same data being released for the UK tomorrow – which could potentially cause a little of reduction to its recent gains. Expectations is that core inflation and inflation rate are to fall in May, which it has done month-on-month since January – which could impact the voting for BoE monetary policy meeting on Thursday. Markets currently pricing in that Bank of England’s first move on monetary easing will take place in September but a split vote could cause uncertainty to markets and see GBP lose its recent momentum.

Once again, we have seen USD taken advantages on markets, performing well in particular to the EUR in the last two weeks. Later today we have retail sales for May, suggesting an improvement from 0% in April to 0.2% in May. Even if figures for May would look promising, its likely that June figures will show a decline – since we have seen the start of a tougher job market and increasing numbers of unemployment benefits which will have an effect on performances for retail sales.

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